Benefits-Drawbacks

Disadvantages Of Index Number

Major limitations or disadvantages of index number can be expressed as follows:

1. Lack Of Accuracy

Index number lacks accuracy because it represents only the rough indication of relative changes in variables (i.e. price and quantity).

2. Difficult To Select Base Year

In this method, variables of current year are compared with the variables of base year. But it is very difficult to choose suitable base year while constructing index number.

3. Nor Suitable For Long Period

Index number is not suitable to compare the changes over long period of time.

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Advantages Of Index Number

4. Limited Use

Index numbers are constructed for the specific time and for certain objectives. They cannot be used for other purposes.

5. Difficult To Select Price

It is difficult to select price (wholesale price or retail price) while preparing index number.

6. No International Comparison

Because of different bases, different variables, it is not possible for international comparison.

Advantages Of Index Number

Keshav Poudel Education , Statistics

Main advantages or uses of index number can be highlighted as follows:

1. Measurement Of Relative Changes

Index number helps to measure the quantitative changes in variables by comparing the data of current year with the data of base year.

2. Measurement Of Price Level Change

Under this method, the price of current period can be compared with the price of past period. It helps to know the changes in price level and value of money.

3. Measurement Of Inflation Rate

Index number helps to know the inflation rate by measuring price level and value of money between two periods.

4. Measurement Of Changes In Standard Of Living

It helps to measure standard of living by comparing cost of living and price level. So, the living standard of people can be known.

5. Wage Policy Formulation

Index number helps to determine wages and allowance of employees. Adjustment in wages and salaries are made according to the cost of living.

6. Useful In Decision Making

Index number is very useful in planning and decision making process of the business firm.

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Disadvantages Of Index Number

7. Useful In Foreign Trade

It is used to compare imports and exports of two different periods. So, it provides key information about the volume of foreign trade.

Disadvantages Of Division of Labor

Keshav Poudel Business , Management

Main drawbacks or disadvantages of division of labor can be expressed as follows:

1. Monotony Of Work

Repetition of same kind of work everyday may lose their interest and create monotony. It leads to decrease in efficiency and quality of work. Therefore, monotony of work is one of the major drawbacks of division of labor.

2. Interdependence

There is interdependence between different departments, different units, different workers groups and different companies. If any one of them do not operate properly, the whole production process will be disturbed.

3. Reduce Worker Mobility

In division of labor, one one type of task is given to each worker. So, it reduces workers mobility.

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Advantages Of Division Of Labor
Advantages And Disadvantages Of Specialization

4. Over Production

Division of labor increases the risk of over production because of increased efficiency. Over production may lead to depression.

5. Unemployment Problem

Due to the lack of mobility, workers cannot develop new skills and ideas to do different type of job. They can only perform certain part of the job. So, it will be difficult for them to find other types job in the future.

Advantages Of Division Of Labor

Keshav Poudel Business , Management

Main benefits or advantages of division of labor can be expressed as follows:

1. Right Man For Right Job

Division of labor follows the principle of 'Right man for right job'. Appropriate job is given to the workers according to their skills and ability that helps to improve employees' performance that leads to increase in the productivity of the firm.

2. Higher Productivity

Workers are employed in right place as per their capacity. Skilled and capable workers can perform their job efficiently without wasting the time and effort. Specialization minimizes errors in the production process. It leads to higher productivity.

3. Skill Enhancement

Workers can enhance their skills because of the repetition of same kind of work everyday. So, division of work makes the workers perfect in their job.

4. Less Training Period

Because of specialization, workers do not need to learn the whole task. They can learn only a part of the job which is related to them. So, it saves time and effort while conducting training program.

5. Invention

By doing the same task again and again, talent workers may discover the simple and easy process to perform the job. So, division of labor may lead to invention.

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Disadvantages Of Division Of Labor

Advantages And Disadvantages Of Specialization

6. Low Cost Of Production

Division of labor ensures higher productivity because of efficient use of human and other resources. Increased production leads to lower cost of production per unit.

7. Increase Goodwill

Because of large scale production, cost of production can be minimized. So, customers get high quality products at lower price. It helps to increase goodwill and image of the firm.

Disadvantages Of Market Economy

Keshav Poudel Business , Economics

Main drawbacks or disadvantages of market economy can be highlighted as follows:

1. Wealth Disparity

One of the major drawbacks of market economy is unequal distribution of wealth. It widens the gap between wealthy and poor individuals. Rich people become more wealthier and poor become more poorer.

2. Distorted Investment

Producers invest their capital only in profitable sectors. So, factors of production are not employed adequately in public sectors like education, health, transportation etc.

3. Workers Exploitation

In market economy, workers are highly exploited by the producers. Bad working condition, no safety measures, long working hours and less wage payment are the major problems of workers.

4. Economic Instability

Because of the lack of control, regulation and supervision, market economy may create uncertainty and instability in the whole economy of the country.

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Advantages Of Market Economy

5. Poor Quality Goods

Main motive of market economy is profit maximization. So, producers can make low quality products to earn more profit.

6. Monopoly

Large producers can dominate the market by eliminating the rival companies. It may create monopoly in the market.

Advantages Of Market Economy

Keshav Poudel Business , Economics

Main advantages or benefits of market economy can be highlighted as follows:

1. Increase Business Efficiency

There will be a competition among producers to produce high quality products at lower cost. So, latest technology and modern methods of production are introduced. Therefore, market economy helps to increase business efficiency.

2. Promotes Innovation

It is another notable benefit of market economy. It promotes innovation because producers wants to create new products in order to gain high profit.

3. Consumer Sovereignty

In market economy, products are produced according to the need and demand of the consumers. So, it gives emphasis on consumer sovereignty.

4. Proper Use Of Economic Resources

Economic resources are properly utilized so that maximum profit can be obtained and wastage can be minimized.

5. Foreign Investment

Market economy helps to bring foreign investment in the country which helps in industrial and economic development of the nation.

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Disadvantages Of Market Economy

6. Freedom Of Choice

Consumers are free to choose and consume the products or services according to their needs, choice and income. Large variety of products are available for all types of people.

7. Fare Competition

It encourages free and fare competition among the producers.